The facile availability of pluripotent adult stem cells would have many important therapeutic applications. Our recent results suggest that the hair follicle is a promising source for such stem cells. Our discovery that the neural stem cell marker nestin is expressed in hair follicle bulge area cells, the site of hair-follicle stem cells (1), suggested that hair-follicle stem cells and neural stem cells have common features. We have demonstrated that the hair follicle gives rise to blood vessels in vivo with the blood vessels originating from the hair-follicle bulge cells (13). We have also demonstrated in vitro that hair-follicle bulge cells can be induced to form neurospheres, which in turn form neurons (21). These results suggest pluripotent hair follicle adult bulge cells could have important therapeutic applications, in particular for neurological diseases. This application utilizes transgenic mice with green fluorescent protein (GFP) under the control of the nestin regulatory sequences (nestin-driven [ND]-GFP) as the source of labeled hair follicle bulge cells. The hair follicle bulge area cells that we have isolated are positive for the stem cell marker CD34, as well as keratin 15-negative and beta-III-tubulin- negative, suggesting their relatively undifferentiated state. These cells can differentiate into glial cells, smooth muscle cells and keratinocytes as well as neurons in vitro. The severed sciatic nerve of C57BL/6 immunocompetent mice was transplanted with ND-GFP cells from the bulge by injection between the two severed regions of the nerve. The nerve was subsequently rejoined. Most of the transplanted GFP-expressing hair follicle bulge cells differentiated into GFAP-positive Schwann cells with myelin sheaths in the rejoined sciatic nerve. The rejoined sciatic nerve contracted the gastrocnemius muscle upon electrical stimulation. Walking print length and intermediate toe spread significantly recovered after transplantation of hair-follicle bulge cells between the severed tibial nerve indicating the transplanted mice recovered the ability to walk normally. Preliminary results indicate that ND-GFP bulge area cells can promote the functional rejoining of the severed spinal cord in mice. These results suggest that hair-follicle bulge cells promote the recovery of peripheral nerve injury (22). The specific aims of this Phase II application are as follows: (1) Characterize the hair follicle bulge area ND-GFP cells by FACS to identify and sort the cell types present. (2) Determine optimal conditions for hair-follicle bulge cells to rejoin and confer function to the severed peripheral nerves in immunocompetent mice. (3) Determine the optimal conditions of hair-follicle bulge cells to rejoin and confer function to the severed spinal cord in immunocompetent mice. These aims will test the hypothesis that hair follicle bulge cells can provide a readily available source of neurologically therapeutic stem cells. Human hair- follicle bulge cells will be further characterized and developed for therapeutic potential for nerve regeneration in Phase III. [unreadable]